Question

ACC241 Uses of Acctg Info Il -Spring 19 B iCourse / ASU Online Eyerusalem Yohannes & 418/19 8:27 AM Homework: Chapter 7 Homework (required) 49 of 12 (9 complete) Sa Score: 0.12 of 1 pt HW Score: 52.67%, 6.32 of 12 E7-37A (similar to) Question Help Brian Cole is evaluating a business opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. Brian can buy the premium wax at a wholesale cost of $32 per tub He plans to sell the premium wax for $62 per tub. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $600 per car show. Read the requirements. Requirement 1. Determine the number of tubs Brian must sell per show to break even. Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach Fixed expenses +Operating income Contribution margin per unit Sales in units Brian must sell tubs per show to breakeven 6 Requirements 1. Determine the number of tubs Brian must sell per show to break even. 2. Assume Brian wants to earn a profit of $900 per show. a. Determine the sales volume in units necessary to earn the desired profit. b. Determine the sales volume in dollars necessary to ean the desired profit. c. Using the contribution margin format, prepare an income statement (condensed version) to confirm your answers to parts a and b. 3. Determine the margin of safety between the sales volume at the breakeven point and the sales volume required to earn the desired profit. Determine the margin of safety in both sales dollars, units, and as a percentage. Print Done Enter any number in the edit fields and then click Check Answer 10 Pemaining

Answer 1

1)
( Fixed expenses + Operating income )/Contribution margin per unit = Sales in Units
($600 + 0) /($62 -$32)	20	units
Brian must sell 20 tubs per show to breakeven.
2)
a)
( Fixed expenses + Operating income )/Contribution margin per unit = Sales in Units
($600 + 900) /($62 -$32)	50	Units
Brian must sell 50 tubs per show to earn a profit of $900 per show.
b)
Contribution Margin % = ($62 - $32)/$62	48.39%
( Fixed expenses + Operating income )/Contribution margin Ratio = Sales in Dollars
($600 + 900) /48.39%	$  3,100.00
Brian must achieve $3100  per show to earn a profit of $900 per show.
c)
Sales (50 x $62)	3100
Less: Variable Cost (50 x $32)	1600
Contribution Margin	1500
Less: Fixed Assets	600
Operating Income	900
3)
Margin of Safety = Target sales in dollars - Breakeven sales in dollars
Margin of Safety = ($3100 - (20 x $62)	$  1,860.00
Margin of Safety = Target sales in Units - Breakeven sales in Units
Margin of Safety = 50 - 20	30	Units
Margin of safety as a percentage of target sales = Margin of safety in dollar/Target sales in dollars
Margin of safety as a percentage of target sales = $1860/$3100	60.00%